European settlers first inhabited Toolangi in the 1860s by paling splitters and then timber cutters, who camped deep in the bush.

They were attracted by the huge stands of mountain ash (Eucalyptus regnans), a tree that splits easily, and the messmate timber, which proved durable as a building material.

[6] On 7 February 2009, the Black Saturday bushfires reached Toolangi and led to two deaths and 18 homes burnt.

The Discovery Centre and education programs was run by the Department of Sustainability and Environment (DSE), however it was closed on 30 June 2012 due to difficulty in compliance with building requirements in bushfire-prone areas.

Toolangi was the home of the poet C. J. Dennis, the author of The Songs of a Sentimental Bloke, Jim of the Hills, The Glugs of Gosh, Rose of Spadgers, The Singing Gardens and Ginger Mick, to name a few.

Opposite the gardens is the pottery of David Williams, who creates unique crystalline-glazed ceramics, which have been exhibited in the National Gallery of Victoria.

[7] Toolangi has a cold rainforest climate, significantly cooler and wetter than Melbourne due to elevation (of 595 metres) and being outside of the Yarra rainshadow; with annual cloud cover resembling that of Southern England in the British Isles and the Pacific Northwest of North America, more than the typical Victorian climate.